The Icelandic government has reinstated an accommodation tax for visitors starting January 1st, 2024.
The tax, which had been suspended during the COVID-19 pandemic, applies to hotel rooms, campsites, mobile homes, and cruise ships.
Rates Increased to Support Sustainability Initiatives
The tax aims to generate funds for sustainability programs and reduce overtourism’s environmental impact.
Hotels and guesthouses now charge ISK 600 ($4.36) per room, campsites and mobile homes ISK 300 ($2.18), and cruise ships calling at Icelandic ports ISK 1,000 ($7.26) per passenger.
Iceland Seeks to Balance Tourism Success and Sustainability
A popular adventure and nature destination, Iceland attracted nearly 800,000 tourists last summer — a 25% increase over 2022.
However, Prime Minister Katrín Jakobsdóttir has voiced concerns over tourism’s strain on natural resources.
The tax reinstatement aligns with Iceland’s goal to achieve carbon neutrality by 2040.
Industry Players Air Mixed Opinions
The measure makes travel to already-expensive Iceland pricier, said G Adventures’ Vice President Yves Marceau.
However, Kristijan Svajnzger of Intrepid Travel noted the tax helps manage tourism’s societal and environmental footprints.
The Global Destination Sustainability Movement’s Guy Bigwood added that more destinations are turning to taxes to fund sustainability efforts.
Domestic Tourism Flourishes Amidst Global Uncertainties
While the tax reapplication may dent foreign visitor numbers, domestic travel within Iceland is poised for growth.
Per the Icelandic Tourist Board, 2023 saw local travelers taking more overnight trips around the country.
Staycations allow residents to enjoy Iceland’s iconic attractions without navigating passport and currency conversions.
Barriers to EU Travelers’ Icelandic Dreams
Iceland’s reinstated tourist tax holds key implications for European Union citizens visiting the country once the European Travel Information and Authorization System (ETIAS) launches in May 2025.
As Iceland falls under the borderless Schengen Area, travelers from 60 countries, including 27 EU member states, will require ETIAS pre-travel clearance to enter as tourists.
With ETIAS payment set at €7, the new €4 to €7 Iceland tourist tax per hotel night essentially doubles the financial requirement for EU citizens’ Icelandic holidays after 2025.
For EU digital nomads and remote workers considering longer-term relocation to Iceland, the cumulative taxes could prove prohibitive to making the move.
The same applies to EU investor immigrants and retiree pensioners hoping to settle in Iceland long-term.
Tax Adds Complexity for EU Immigration
The Iceland tourist tax reapplication stands to complicate EU immigration policy alignment with the Schengen Area.
With Iceland charging non-refundable tourism taxes atop future ETIAS fees, other Schengen countries may follow suit with additional border taxes that deter EU migration.
As the EU seeks to facilitate immigration flows under initiatives like the ETIAS, complex tax structures being implemented by individual Schengen states could stymie freedom of movement for EU citizens.
This risks undermining the borderless Schengen Area vision.
Going forward, Brussels will need to evaluate how Iceland’s new tax impacts EU immigration and mobility given May 2025’s ETIAS launch.
Streamlining taxes across the region remains key to ensuring travel access and immigration opportunities across Schengen.
Tax Fuels Sustainable Tourism Goals
The tourist tax reinstatement sees Iceland continue leading sustainable tourism development globally.
While the fee hike may deter some foreign visitors, it crucially channels funds into protecting Iceland’s nature and communities.
If successful, the model could prompt other destinations to follow suit with tourism taxes for social and environmental causes.